Jobs Report: March Unemployment Falls, But Job Additions Disappoint

Job seekers wait for the opening of an employment fair sponsored by Job News in partnership with USOilWorker.com and The Texas Veterans Commission at the Norris Conference Center in San Antonio, Texas, March 19, 2013.

Eddie Seal/Bloomberg/Getty Images

The unemployment rate fell to 7.6 percent in March but just 88,000 jobs were added, raising fears that the economy is beginning to cool after several strong months.

Ahead of Friday's jobs report, economists braced themselves for grim numbers. On Thursday, the Labor Department reported that the number of jobless Americans filing unemployment claims increased for the third consecutive time last week.

"This was an ugly report as the expected number was about 190,000," said Joe "JJ" Kinahan, chief derivatives strategist with TD Ameritrade. "The major area of concern is the loss of jobs in the Retail sector. When taken with the recent disappointment in ISM and housing numbers this may cause a reassessment of what we feel currently about the economy."

The largest area of concern, he added, is that the participation rate in the workforce is the lowest since May 1979.

"That was a very bleak time in our economy and we are certainly not at that level but the fact that people are not participating in the workforce will quickly cause concern in the housing and retail markets," Kinahan said.

Stephen Bronars, chief economist of Welch Consulting, added that the labor force participation rate of adult men has fallen below 70 percent for the first time ever.

"This is just one month of a report, but it is clear that employment is growing just enough to keep pace with population growth and millions of people who lost their jobs and were once unemployed, have now given up looking for work and are no longer participating in the labor force," Bronars said.

The average of the past three months of nonfarm payroll gains has been 191,000 per month. Today the gain for February was revised up to 268,000, Labor Department figures showed.

Bronars expected the addition of 175,000 to 200,000 jobs in March with the rate remaining at the previous level.

Last month, the Labor Department reported that the unemployment rate fell to 7.7 percent in February.

Before Friday's report, the Labor Department had reported strong gains in construction employment, which had increased 111,000 over the last three months.

"For the economy to continue to improve, the pace of growth in construction will have to continue to improve," Bronars said, with employment still about 25 percent, or 1.9 million jobs, below the pre-recession peak.

"Another month of data will help decide whether this was an anomaly, or whether part-time jobs are taking the place of full-time jobs," Bronars said.

Bronars also expressed concern that the labor force participation continues to lag.

"Much of the decline in the unemployment rate has been due to people giving up their job search. A decrease in the unemployment rate and an increase in labor force participation are needed for a healthy recovery," he said.

Kinahan at TD Ameritrade, said the market was expecting the addition of 193,000 jobs.

"This number does become key as we have seen a steady growth in many government numbers over the last few months yet the employment numbers seem to be stuck in a rut," he said. "The added pressure to jobs comes that last numbers were a bit disappointing and the numbers we have seen this week have not been up to snuff."

With the S&P 500 at all-time highs, Kinahan said there is added selling pressure on the market.

"This is a situation in which a miss is often punished more than a beat of the number is rewarded," he said.